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Coronavirus And Earnings In Focus This Week
Stocks closed lower on Friday as profit taking continued.
After 5 months of gains, traders decided to pull some profits as concerns over the coronavirus grow.
At the moment, the relationship between the outbreak and stocks is mostly psychological.
But worries over the potential economic impact are real. Travel and lodging related industries have taken an immediate hit. And gaming companies, especially those with exposure in China, are being affected.
S&P companies 'only' get about 6% of their revenue from China. But if the outbreak spreads, global tourism will be affected, and with it, sales of all types of products.
The virus, however, is largely contained in China, but it has spread to other countries. Fortunately, the reported cases elsewhere are relatively few. And China is being credited with a stronger response with this virus in comparison to other outbreaks, such as SARS back in 2003.
U.S. stocks were only mildly affected back then. And markets around the world rebounded quickly.
Traders will continue to monitor these developments. But if the response toward remedying this virus outpaces previous outbreaks, the markets should be able to put this behind it in short order.
Traders will also be monitoring earnings as
Earnings season is kicking into high gear with 586 companies reporting earnings this week, and another 748 next week.
Since stocks typically go up during earnings season, nobody wants to be away from the market too long, as it's not uncommon to see individual stocks soar 10%, 15%, or even 20% or more in one day after an earnings report.
If we see more profit taking, that's fine.
But I'd be a buyer on a dip. And a buyer on strength.
Because with a record economy, it looks like there's a lot more upside to go.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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